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Douglas Swenson, an Idaho businessman who persuaded hundreds of Minnesotans and others to invest in failed commercial real estate ventures, was indicted Wednesday on fraud charges in a case where losses were at least $169 million and could be considerably more.

The 83-count indictment filed in U.S. District Court in Boise alleges that Swenson and others doing business as DBSI Inc. misled investors about the health of their real estate holdings and the financial wherewithal of DBSI, while using funds from new investors to pay returns promised to older ones.

"DBSI's true financial condition was concealed from investors, financial advisers, broker dealers, due diligence officers, DBSI wholesalers and other DBSI employees," the indictment states.

Swenson, the founder and president of DBSI, was charged along with sons David and Jeremy Swenson and DBSI counsel Mark Ellison with conspiracy to commit securities fraud, wire fraud, mail fraud and interstate transportation of stolen property.

Another DBSI executive, Gary Bringhurst, pleaded guilty earlier this week to one charge of conspiracy to commit securities fraud.

Attorneys for Swenson did not immediately respond to requests for a comment, but they told the Idaho Statesman that DBSI was a "successful and highly profitable operation" that got stung in the recession. "There was no fraud," the attorneys at Calfo Harrigan Leyh & Eakes law firm said in a statement.

Roughly 500 to 800 Minnesotans are among the 8,000 investors nationwide who lost large sums when the real estate industry collapsed in 2008, and DBSI was forced to file for bankruptcy.

One of those victims was Ann Dykstra, a retired educator from Golden Valley who called Wednesday's news "a long time coming." Dykstra lost much of the $500,000 she invested in several DBSI properties.

"But my loss is moderate compared to others who had their life savings invested," she said.

Brad Williams, a Minneapolis attorney who represented some of the victims, said it's difficult to calculate the losses in Minnesota and elsewhere. Some lost $1 million, while others invested $25,000, he said.

"It was all over the board," Williams said. "But for the most part, most people could not afford to lose their investment."

DBSI managed commercial real estate properties throughout the country and marketed those properties as safe investments with steady returns of around 7 percent.

Investors, often mom-and-pop types who had recently sold rental property, could defer capital gains taxes by investing in tenant-in-common (TIC) units in real estate syndicated by DBSI.

The indictment, however, states that DBSI and its other businesses "were almost universally unprofitable."

At one point, DBSI, which started doing business in 1979, had more than 240 properties under its umbrella — including the Landmark Towers office building in downtown St. Paul — and more than 8,000 investors, including up to 800 in Minnesota.

According to the indictment, DBSI would acquire commercial properties and then offer them to investors for 20 to 30 percent more than DBSI paid.

Business appeared fine until the real estate market collapsed in 2008. Later that year, DBSI filed for bankruptcy. At the time, the indictment states, DBSI was losing $3 million a month.

An examiner working with the U.S. Bankruptcy Court in Delaware concluded in a 2009 report that DBSI was engaged in "an elaborate shell game" and was in need of new investor funds to cover existing obligations as far back as 2005.

In other words, DBSI had become an alleged Ponzi scheme.

DBSI booked profits from "inflated markups" of properties it sold to investors, the examiner concluded.

"DBSI Inc.'s guarantees of investments were illusory and were based on the cultivated false appearance that DBSI had substantial value," the examiner reported.

Williams and Edward Sheu, attorneys for the Minneapolis law firm Best & Flanagan, are among the few to get anything but pennies on the dollar for investors in the now-bankrupt business.

After filing an arbitration claim in 2009, Williams and Sheu obtained a $3.1 million award on behalf of seven clients who invested approximately $3 million with DBSI in 2008 just months before the company filed for bankruptcy.

"This was one of the most egregious situations I've seen," said Williams. "Swenson made this case as time-consuming and complicated as possible."

"He was swinging for the fences and trying to hit a home run," Sheu added. "He's been trying to come up with a ruling that shows his innocence rather than cutting a deal."

As for Dykstra, she recently received a settlement check from one of the lawsuits against DBSI. It was for $500.

"If I get more, it will be very, very modest," she said from home Wednesday. "Most of us long ago decided we had to move on."

David Phelps • 612-673-7269